Microeconomics Assignment Questions: Supply & Demand

Demand and Supply Schedule for Rap Music CDs

Price Quantity Demanded Quantity Supplied
10 70 million 20 million
11 65 million 40 million
12 60 million 60 million
13 55 million 80 million
14 50 million 100 million

a) Using the given supply and demand schedule above, graph the supply and demand curves for rap music CDs.

b) What are the equilibrium price and quantity? In other words, where is Qd = Qs? What is the quantity that matches in both columns and what is the price at that point?
Equilibrium quantity, where quantity demanded is equal to quantity supplied, is ________ million.
Equilibrium price, that price at which Qd = Qs, is ____________

c) At a price of $13, is there is shortage or surplus? How much is the shortage or surplus?
In other words, what is the quantity demanded at a price of $13? __________________
What is the quantity supplied at a price of $13? ______________________
Which is larger at a price of $13, quantity demanded or quantity supplied? ___________
By how many millions of units is one bigger than the other? ______________ million
If quantity demanded is larger, there is a shortage. If quantity supplied is larger, there is a surplus. Which do we have here, a shortage or a surplus? ___________________

d) Show graphically what happens to the market for rap music CDs if the price of CD players increases. What are the new equilibrium price and quantity?
Suppose that the price of CD players increases. CDs and CD players are goods typically consumed together, so they are called __________________.
If the price of CD players increases, people will buy fewer CD players. That's the Law of Demand. However, they will also change their entire demand for rap music CDs as well. Since they'll be buying fewer CD players, will they need more or fewer CDs to play on the CD players they're not buying? __________________ (more or fewer?)

Let's suppose that the new demand schedule looks like this:

Price Quantity Demanded Quantity Supplied
10 45 million 20 million
11 40 million 40 million
12 35 million 60 million
13 30 million 80 million
14 25 million 100 million

What is the new equilibrium? The new equilibrium quantity, where Qd = Qs, is ______
and the new equilibrium price, the price at which Qd = Qs, is $_________
Plot the new demand curve with the old one. Is the new one to the left or the right of the old one? ________________ (left or right?)
If the new demand curve is on the right side of the old one, then demand has increased. If the new demand curve is on the left side of the old one, then demand has decreased. Which is it? Did demand for rap music CDs increase or decrease? _________________
Finally, how did the equilibrium price and quantity change in direction? Did they increase or decrease?
Equilibrium price of rap music CDs ______________ (increased or decreased?) after the price of the CD players increased. Equilibrium quantity of rap music CDs _______________ (increased or decreased?) after the price of the CD players increased.